The Ultimate Indicator is an indicator developed by Larry Williams in 1976 and published in the Stocks Commodities Magazine in 1985, the Ultimate Oscillator is a momentum oscillator designed to capture momentum over three time periods. different. The goal is to limit or avoid false divergences from other oscillators.

For example, after a rapid increase in price, a bearish divergence may appear on the oscillator, but the price continues to rise. The Ultimate indicator will probably get around this by using multiple timeframes for more reliable signals instead of just a period like other oscillators.

Williams identified a buy signal based on a bullish divergence and a sell signal on a bearish divergence. The image below is the interface of the Ultimate indicator on the chart:

How to calculate the Ultimate indicator:

There are three steps to calculating the parameters on the Ultimate indicator. This example uses parameters 7, 14, and 28:

1. Before calculating, need to define two variables that are Buying Pressure and True Range.
• BP (Buying Pressure) = Close price - Lowest price (the lowest price or previous closing price)
• TR (True Range) = Highest price (Highest price or previous closing price) - Lowest price (previous low or close)
2. Then Ultimate Oscillator uses these metrics for three cycles:
• Avg7 = (Total BP over 7 periods) / (Total TR over 7 periods)
• Avg14 = (Total BP over 14 periods) / (Total TR over 14 periods)
• Avg28 = (Total BP over 28 periods) / (Total TR over 28 periods)
3. And the calculation of the made Utimate indicator is:
• UO (Ultimate Oscillator) = 100 x [(4 x Avg7) + (2 x Avg) + Avg28] / (4 + 2 + 1)
Basic usage of the UO indicator

An easy way to use the Ultimate Oscillator (UO) indicator is to use UO to measure buying pressure. When the buying pressure is strong, UO increases and when the buying pressure is weak, UO decreases.

UO indicator calculations are used for 3 distinct time periods, which are weighted. This is the most important feature of UO because it gives the greatest weight to the shortest interval, but still calculates based on the longest interval. The goal of this is to avoid false signal divergence.

The bullish and bearish divergence signals are on UO

There are 3 conditions for bullish and bearish divergence on the UO indicator:

Bullish divergence on UO
• A bullish divergence is formed when the price makes a lower low while the UO creates a higher low.
• The lowest low of the divergence should be below 30 on the UO indicator.
• UO breaks above the previous top of the divergence signal.
You see the picture below:

Divergence on UO
• A bearish divergence is formed when the price makes a higher high while the UO makes a lower high.
• The highest peak of the divergence should be above 70 on the UO indicator.
• UO breaks down below the previous bottom of the divergence signal.
You see the picture below:

As can be seen, the Ultimate Oscillator (UO) indicator is very useful for technical analysis because it improves the quality of the divergence signals for traders, a signal that many brothers use.

Settings for UO indicator

Install the input as shown below:

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